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The American Rescue Plan Act of 2021 (“ARPA”) was signed into law earlier this month and becomes effective March 31, 2021.  It has significant impacts on most employers that include extending or expanding employee leave options and benefits for employers that voluntarily decide to provide them.  Note:  The ARPA does not mandate any new or additional leave be given to any employee.  The Emergency Paid Sick Leave (“EPSL”) and Emergency Family Medical Leave Act (“EFMLA”) mandated by the Families First Coronavirus Relief Act (“FFCRA”) have not been extended as mandates beyond December 31, 2020.  However, the ARPA provides certain tax benefits for employers that voluntarily decide to continue providing such leave, as outlined below.

 

[For purposes of this guidance, and because most employers are already familiar with the terminology created by the FFCRA, the new voluntary leave benefits are still referred to as EPSL and EFML in this guidance.]

 

“If the leave benefits are optional, why should we provide them?”

Under the ARPA, employers are entitled to an employment tax credit for 100% of wages paid as qualified paid sick leave to employees if the leave was taken between March 31 and September 30, 2021.  The credit is limited to the value of 80 hours of wages.  This credit is in addition to any credit claimed by employers for EPSL taken prior to March 31, 2021.

 

The ARPA also provides an additional tax credit for 100% of wages paid as qualified EFMLA taken during the same period.  This credit is limited to either $200/day per employee or $12,000.00 in the aggregate for each employee annually.  This credit is also in addition to any credit provided or given for EFMLA claimed by employers prior to March 31, 2021.  Leave that was provided between January 1 and March 31, 2021, was also optional, i.e. not mandated by Federal law, but still qualified for these tax credits.

 

Previously these full payroll tax benefits were only available to private businesses.  ARPA now extends  credits based on the total amount paid to an employee for leave (not just a credit for the SSDI paid by the employer for EPSL or EFML under the FFCRA)  to local government employers, like counties, municipalities, public schools, community colleges, etc.

 

“Tax credits for providing my employees leave sounds good.  What do I have to do?”

An employer that has previously provided EPSL or EFMLA in compliance with the FFCRA needs to tweak their leave policies or program a bit.  The ARPA credits are available for employers who allow leave for an employee who:

 

1. Is subject to a Federal, State or local quarantine or isolation order related to COVID-19;
2. Has been advised by a health care provider to self-quarantine related to COVID-19;
3. Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
4. Is caring for an individual subject to an order described in 1 above or in self-quarantine as described in 2 above; or
5. Is unable to work because of a need to take leave to care for a child whose school or place of care is closed (or whose childcare provider is unavailable) for reasons related to COVID-19.

 

The ARPA adds the following additional qualifying reasons for an employee who is:

 

6. Obtaining a COVID-19 vaccination;
7. Recovering from an injury, disability, illness or condition related to a COVID-19 vaccination; or
8. Seeking or awaiting results of COVID-19 testing or diagnosis because either the employee has been exposed to COVID-19 or the employer requested the test or diagnosis.

 

The three new reasons added (6, 7 and 8 above) should be added to any existing EPSL policy that you have adopted.  It is important to expand the circumstances under which leave is available to include those three new circumstances in order to be eligible for the tax credits for this voluntary leave program.

 

“Should these leave benefits be provided to employees who previously took leave?  Should we limit the amount of leave available to them based on their prior leave?”

The ARPA requires an employer to reload the allotment of 10 days (80 hours) per employee for qualifying paid sick leave.  Thus, even if an employee has already taken at least 80 hours of EPSL as mandated under the FFCRA or has taken such leave under your voluntary extension of those leave benefits following the expiration of the FFCRA through March 31, 2021, the employer should “re-set” the employee’s paid sick leave allotment effective April 1, 2021.  This may allow you to seek a tax credit for an additional 80 hours of paid sick leave.

 

“Do the tax credits and leave requirements apply to both sick leave and family or medical leave?”

The ARPA does not create any new allotment for paid EFML which remains capped at 12 weeks.  However, the qualifying reasons for paid family or medical leave will include any of the 8 qualifying reasons listed above.  This is significant:  previously, EFML was only mandated for (and presumably tax credits were only available for EFML taken through March 31, 2021) for reason #5 above.  Now, however, EFML should be available to any employee who meets any of the 8 circumstances listed above.

 

The ARPA also changes some aspects of the EFMLA as mandated by the FFCRA for this new voluntary leave program:  the first two weeks of family leave can be paid, and the tax credits available for such leave have been increased from $10,000.00 to $12,000.00 annually per employee.

 

“Can we limit the leave benefits to certain categories of employees?”

The ARPA makes clear that an employer may not discriminate in terms of employee eligibility for paid leave.  Thus, an employer cannot qualify for these tax credits if its paid leave program discriminates in favor of certain highly compensated employees, full-time employees, or employees on the basis of seniority or tenure.  Thus, the voluntary extension of leave benefits must be broad-based and available to most categories of employees.

 

“What are my next steps?”

You should decide now whether you wish to provide qualifying paid sick leave and family leave to employees, as it should become effective by April 1, 2021, in order to qualify for the potential tax benefits.  There is an argument that you must keep the program intact through September 30, 2021, although there are other ways of interpreting the law on this point. It is also unclear whether you can enact a voluntary leave program that will generate the leave benefits available under the ARPA if you did not voluntarily extend the leave program from January 1 through March 31, 2021.  However, this is worth considering.

 

You should also revise your Emergency Sick Leave and Emergency Family Medical Leave policies to reflect the new circumstances under which leave is available.

 

Your HREM team can help with all of these tasks and will be happy to advise and guide you as these employment benefits and considerations continue to evolve.  Please contact John Leidy at JLeidy@hrem.com or 252-698-0201.